Dasu inquiry fails to fix responsibility for soaring cost

Express Tribune

13-04-2025

Listen to article
An official inquiry has not fixed the responsibility for an "astronomical increase" of 240% in cost of the Dasu Hydropower project to $6.2 billion on any single entity or individual but pointed figures at Chinese contractors, Wapda and the Planning Commission.
The three-member committee also blamed the local administration of Kohistan district for a delay in land acquisition. It said that the cost was increased by Rs48 billion because of enhanced security arrangements after two deadly attacks on the Chinese contractors. The impact of security arrangement was hardly 3.8% in the total cost escalation.
The report stated that "complex interplay of factors and unforeseen challenges" caused the 10-year delay and Rs1.3 trillion or 240% increase in the Dasu hydropower project cost to Rs1.74 trillion. In dollar terms, the cost was equal to $6.2 billion — an unreasonable price tag for a 2,160 megawatts hydropower project.
The committee said that the Chinese contractor ignored the consultants' instructions, local administration could not timely acquire the land and more importantly Wapda awarded the construction contracts "without ensuring availability of the land required by the contractors, which resulted in delays and idle claims".
The committee failed to fix the responsibility on any of the Wapda chairmen or any senior officer by name despite finding that it awarded contracts without having land in hand.
The Planning Commission has been held responsible for underestimating land acquisition and resettlement problems.
Headed by Planning Minister Ahsan Iqbal, the Central Development Working Party on Friday conditionally recommended the Dasu hydropower project for the approval of the Executive Committee of the National Economic Council.
"It is a considered opinion that the delays in Dasu Hydropower Project (Stage-1) are the result of a complex interplay of factors," reads the findings of the three-member committee.
In December, the government ordered the inquiry to identify the reasons and fix responsibility for inability to complete the project after the first revision made in the cost in 2019.
The inquiry committee was led by civil engineer Ather Hameed. Among the other members was Syed Ayaz Muhammad Haider, director monitoring of the Water Resources Ministry and Imran Najam procurement expert of the ministry.
The inquiry concluded that the construction delays have been compounded by unforeseen significant administrative challenges and procedural bottlenecks in land acquisition, compensation payment and resettlement processes".
Unforeseen technical challenges have further distracted the project implementation schedule. Social issues, including community grievances and resistance, have further slowed progress, according to the committee.
The inquiry committee further stated that the lack of seamless coordination between contractors and consultants, security challenges in the project area and natural causes such as difficult terrain, unforeseen geological conditions and flash floods have added to the delays.
"These issues are interconnected, making it clear that no single stakeholder or entity can be solely held responsible", concluded the inquiry committee.
When contacted, Water Resources Ministry Secretary Syed Ali Murtaza said that the inquiry was conducted by chief engineering adviser, which is an independent entity and is meant for undertaking such inquiries.
The secretary further said that the inquiry committee found out that 85% increase in the cost was because of increase in the prices and the remaining 15% was due to changes in the scope and design of the project.
The inquiry committee stated that the success of the project depends on a collaborative approach that fosters alignment and cooperation among the federal government, the provincial government of Khyber-Pakhtunkhwa, district administration of Kohistan, Wapda, contractors, consultants, and local communities.
The inquiry recommended enhancing stakeholders' coordination, streamlining the compensation and resettlement processes. It also proposed proactively addressing social issues particularly on 132kV transmission line and implementing a robust management strategy to handle technical, social, and security challenges.
But these are the issues that should have been catered for in 2014. The project has already been delayed by 10 years to 2029.
The original PC-I costing Rs486 billion had been approved in 2014 with an aim to generate 2,160MW of electricity and the completion date was 2019. Due to increased land rate, the cost was revised to Rs511 billion in October 2019 and implementation was extended to June 2024.
The main civil work contractor for Stage-I is M/s China Gezhouba Group Company (CGGC) while supervision is provided by a joint venture of M/s Nippon Koei of Japan and M/s Dolsar of Turkey in association with local sub-consultants including M/s DMC, M/s NDC and M/s PEES, according to January 2025 inquiry report.
As of January, the overall physical progress is 23.3% and the financial progress at 23%, states the inquiry report on the second revision. The project is mainly funded by the World Bank, local and foreign commercial banks and through Wapda equity. So far, Rs317 billion have been spent on the project.
The Rs1.73 trillion total cost included Rs479 billion interest on the loans to be taken for the completion of the project.
The World Bank had given $517 million and out of which till December $385 million had been utilized. The Credit Suisse Bank also provided a $350 million loan. The local bank's consortium led by M/s Habib Bank Limited also provided a Rs144 billion loan against the original cost of the project.
The World Bank is also ready to pour in another expensive loan of $1 billion for the project.
Cost escalation break-up
The inquiry report has listed a comparison of increased cost from Rs511 billion to Rs1.73 trillion. The civil works cost increased from Rs224.5 billion to Rs771 billion -a surge of Rs547 billion or 243%. The electrical and mechanical work cost increased from Rs54.3 billion to Rs87.3 billion -an increase of Rs33 billion or 61%.
The social resettlement cost was increased from Rs57.5 billion to Rs140.3 billion — a surge of Rs82 billion or 144%.
The security cost was increased from Rs1.5 billion to Rs50 billion -an increase of Rs48.2 billion or 3136%. The project has faced two suicide attacks resulting into killings of 15 Chinese nationals and four Pakistanis.
The project administration cost was increased from Rs13.5 billion toRs54.4 billion — an increase of Rs41 billion or 304%. The consultancies cost was increased from Rs8.3 billion to Rs56.5 billion — a surge of R48.2 billion or 580%. Since the quantum of the loans jumped, so does the interest cost. The interest cost increased from Rs107 billion to Rs479 billion — an increase of Rs372 billion or 349%.
The contingencies were increased from Rs44 billion to Rs99 billion -an increase of Rs55 billion or 124%.
The inquiry committee said that there was a significant delay in acquisition of land of 9,875 acres. But the land cost impact had already been included in the first revised project, and it is not the reason for the cost escalation in the second revision.
The committee noted that the design of the relocation of 52-kilometre-long Karakoram Highway underwent significant changes due to land acquisition delays and geological conditions. However, the committee did not fix the responsibility for ignoring geological conditions at the time of planning first in 2014 and then in 2019 when the project was revised.
The committee validly identified the security as a reason for the delay but it increased the cost by only Rs48 billion out of the total additional increase in the cost of Rs1.27 trillion.
Fixing Responsibility
The inquiry committee identified lack of coordination between contractor and the engineer. It said that delays occurred due to "the contractor's failure to submit activity plans, frequent disregard for the consultant's instructions, insufficient deployment of resources despite repeated directives and inadequate coordination between the contractor and the engineer".
It further said that the contractor's reports indicated that the resources currently available at each worksite are inadequate to achieve the target completion dates.
The committee said that the district administration was responsible for acquiring the land, which it could not timely acquire. The committee said that the Wapda awarded the contracts without ensuring availability of the land required by the contractors, which resulted in delays and idle claims.
The slow pace of the local area development programme eroded community trust and exacerbated local resistance, reflecting a lapse in Wapda responsibility for effective community agreement.
"Both Wapda and the Planning Commission not only clearly underestimated land acquisition and resettlement but also showed lack of cognitive approach regarding project planning and scheduling without substantial completion of land acquisition and resettlement process".
The inquiry committee said that the Chinese Contractor is also responsible for slow progress in the construction of the dam and powerhouse works due to mobilization of inadequate resources.
The committee said that Dasu Hydropower Consultants ad Design and Supervision Consultants were responsible for "frequent design changes, which highlight shortcomings on the part of the design consultant.
The absence of an approved dedicated PC-I for land acquisition as recommended by the Planning Commission, indicates a policy oversight that has contributed to the project delays.